Virginia Governor Bob "Tax Hike" McDonnell and his wifeare being investigated by the FBI regarding allegations they used the Governor’s office to promote the interests of one of the Governor’s major donors. This donor also paid for McDonnell's daughter’s wedding and provided other gifts for the Governor and his family.

Governor McDonnell's defense is that promoting Virginia businesses is simply part of his job. In fact, the Virginia legislature has created a raft of taxpayer-funded programs designed to "encourage" Virginia businesses. Many of these programs, such as the Governor’s Opportunity Fund and the Governor’s Agriculture and Forestry Industries Development Fund, distribute funds "at the discretion of the Governor." And what businesses is the governor likely to "discreetly" support? Businesses which never support him that are run by complete strangers or businesses run by big donors and/or close friends? To paraphrase writer Michael Kinsley, what is really outrageous about the corporate state is not what is done illegally but what is perfectly legal.

But the Virginia story illustrates another cost of privilege: it inevitably invites questions of impropriety. The fact is, it is very difficult to devise objective criteria for dispensing privileges to particular firms. So one doesn’t have to look very hard to find apparently subjective decisions: Was Solyndra awarded half a billion taxpayer dollars because it had a superior business model? Or was it given money because green energy is politically popular and the vice president wanted to host a ribbon-cutting ceremony there? Did the Administration offer trade protection to domestic solar panel makers because the Chinese were engaged in “unfair competition” or because domestic solar panel manufacturers are politically powerful and well-connected?

I don’t see how these questions could possibly be answered definitively. Instead of trying to pretend that they can be, we should change the institutions that inevitably give rise to charges of impropriety. We should stop presuming that an elected official’s job description includes the promotion of particular businesses. If we stop asking politicians to pick winners and losers, there will be no more scandals about whom they pick.